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10/20/2011

Econ questions

1. When a consumer is able and willing to buy a good or service, he or she creates which of the following?

a.

consumption

c.

elasticity

b.

demand

d.

allocation

____ 2. What determines the price and the quantity produced of most goods?

a.

the consumer’s perception of necessity

b.

the interaction of supply and demand

c.

the availability of substitutes for the goods

d.

the quality of the goods that are produced

____ 3. What are inferior goods?

a.

goods that are not well produced

b.

goods that no one wants to buy

c.

goods for which the demand rises when income falls

d.

goods for which the demand falls when income rises

____ 4. What shows the quantities of products demanded at each price by all consumers in a market?

a.

an elasticity and consumption list

c.

a market pricing list

b.

a schedule of consumer prices

d.

a market demand schedule

____ 5. What does it mean when the demand for a product is inelastic?

a.

People will not buy any of the product when the price goes up.

b.

A price increase does not have a significant impact on buying habits.

c.

Customers are sensitive to the price of the product.

d.

There are very few satisfactory substitutes for the product.

____ 6. What kind of table lists the quantity of a good that a person will buy at different prices?

a.

demand schedule

c.

market demand schedule

b.

demand curve

d.

market demand curve

____ 7. How is the current demand for a good related to its future price?

a.

If the price is expected to drop, current demand will fall.

b.

If the price is expected to drop, current demand will rise.

c.

If the price is expected to rise, current demand will fall.

d.

Current demand is not related to future price.

____ 8. Which of the following is a good that might not be bought when prices rise?

a.

complement

c.

inferior good

b.

substitute

d.

luxury

____ 9. What kind of changes would be expected in the demand of a country that has a growing population?

a.

a rise in the demand for recreation

b.

a shift in the demand for high-quality food

c.

a rise in the demand for shelter

d.

a lowering in the demand for automobiles

____ 10. What does unitary elastic demand mean?

a.

The elasticity of demand is mathematically determined.

b.

The elasticity of demand is different at each unit on the price range.

c.

The demand is inelastic at a low price but becomes elastic as the price rises.

d.

The percentage change in quantity demanded is exactly equal to the percentage change in price.

____ 11. Which of the following goods would be likely to be bought in the same quantity even if it doubled in price?

a.

shoes

c.

pencils

b.

telephones

d.

computers

____ 12. Which of the following events could cause the demand curve for sports magazines to shift to the right?

a.

The publisher cuts the price of an issue from $3.95 to $2.50.

b.

The price of an issue of a popular computer game magazine rises from $2.95 to $3.95.

c.

A star basketball player interests thousands of people in professional sports for the first time.

d.

A local library buys a subscription to the sports magazine for its reading room.

____ 13. Alex receives a raise at work and continues to work the same number of hours each week. His demand for $3 t-shirts, which he considers an inferior good, will

a.

increase.

c.

stay the same.

b.

decrease.

d.

have no relation to his income.

____ 14. Will, a sprinter on the track team, has inelastic demand for sports drinks. The local store has raised the price of a sports drink from $1.00 to $1.50. Which of the following could describe Will’s response to the price change?

a.

He bought 15 bottles a month at $1.00 and 20 bottles a month at $1.50.

b.

He bought 10 bottles a month at $1.00 and 8 bottles a month at $1.50.

c.

He bought 15 bottles a month at $1.00 and 5 bottles a month at $1.50.

d.

He bought 10 bottles a month at $1.00 and 5 bottles a month at $1.50.

____ 15. Jasmine is willing to buy 40 pencils at 25 cents apiece. When the price is ten cents apiece, she is willing to buy 100 pencils. Which of the following statements could be true about Jasmine’s demand for pencils?

a.

She will buy 80 pencils at 15 cents apiece.

b.

She will buy 20 pencils at 20 cents apiece.

c.

She will buy 100 pencils at 5 cents apiece.

d.

None of these statements is likely to be true.

____ 16. According to Figure 4.4, how many slices of pizza will Ashley buy if the price is $1.00 per slice?

a.

one

c.

three

b.

two

d.

four

____ 17. According to Figure 4.4, what is Ashley’s elasticity of demand as the price of a slice of pizza decreases from $2.00 to $1.00?

a.

5.0

c.

2.0

b.

1.0

d.

4.0

____ 18. A new restaurant has opened. Ashley’s demand for pizza has decreased and her demand curve has shifted. Based on Figure 4.4, which combination of price and quantity demanded would you expect to find on her new demand curve?

a.

$1.50, three slices

c.

$2.00, one slice

b.

$2.00, three slices

d.

$1.00, five slices

____ 19. A slice of pizza costs $4.00. Based on Ashley’s demand curve in Figure 4.4, what is her quantity demanded of pizza at this price?

a.

one

b.

zero

c.

five

d.

There is not enough information to answer the question.

____ 20. Which of the following is an example of lower production costs brought about by the use of technology?

a.

the delivery costs of gasoline to the consumer by diesel trucks

b.

the use of e-mail to replace slower surface mail

c.

the making of breads and pastries in local shops rather than large bakeries

d.

the importing of fresh vegetables from South America rather than using canned vegetables

____ 21. What is the effect of import restrictions on prices?

a.

They cause prices to drop.

b.

They cause prices to rise.

c.

They often cause prices to rise steeply and then drop.

d.

They usually do not have any lasting effect on price.

____ 22. Which of the following is the best example of the law of supply?

a.

A sandwich shop increases the number of sandwiches they supply every day when the price is increased.

b.

A food producer increases the number of acres of wheat he grows to supply a milling company.

c.

A catering company buys a new dishwasher to make their work easier.

d.

A milling company builds a new factory to process flour to export.

____ 23. Which of the following is an example of a good with an inelastic supply?

a.

beanbags

c.

apples

b.

toothbrushes

d.

hats

____ 24. Which of the following receives government subsidies that are in place to protect the population rather than for economic reasons?

a.

a national car company in Indonesia

c.

tobacco growers in the United States

b.

small farmers in France

d.

national airlines in Western Europe

____ 25. What factor has the greatest influence on elasticity and inelasticity of supply?

a.

profit

c.

labor

b.

time

d.

financing

____ 26. Which of the following is a fixed cost for a store?

a.

short-term workers

c.

advertising

b.

rent

d.

inventory

____ 27. Which of these events would indicate a movement along a supply curve for batteries?

a.

Workers at a major battery factory go on strike and stop production.

b.

A new law requires battery manufacturers to spend more money on environmentally-sound trash disposal.

c.

Battery manufacturers raise the price of eight AA batteries from $3.50 to $3.95 a set.

d.

A new trade agreement enables stores to import foreign batteries.

____ 28. Which of these is an example of a good with elastic supply?

a.

large hand-made rugs

c.

sandwiches

b.

plums

d.

passenger airplanes

____ 29. If the supply of a good is inelastic,

a.

producers will not change their quantity supplied by much if the market price doubles.

b.

a small increase in price will lead producers to sharply increase their quantity supplied.

c.

producers have diminishing marginal returns of labor.

d.

producers will increase their quantity supplied in response to sharp drops in the market price.

____ 30. A baker calculates that by spending $16 on labor and materials, she can bake 10 cakes a day. $24 will allow her to bake 12 cakes, while $36 spent on labor and materials produces 14 cakes. In terms of capital and labor, the baker has

a.

increasing marginal returns.

c.

decreasing marginal returns.

b.

constant marginal returns.

d.

negative marginal returns.

____ 31. A shoe factory has an elasticity of supply of .5 as the price of shoes rises from $50 to $75. If the factory produced 100,000 shoes at a market price of $50, how many will be produced at the new price?

a.

75,000

c.

200,000

b.

125,000

d.

400,000

____ 32. Complete the following sentence: At the most profitable level of production, a firm’s marginal cost will be _____ the market price.

a.

equal to

c.

less than

b.

set by

d.

greater than

____ 33. Which of the following is an example of government influence on supply?

a.

law of supply

c.

marginal costs

b.

subsidies

d.

market supply curve

____ 34. If the market price for pizza is $2.00 a slice, how many slices will be supplied by all producers in the market, according to Figure 5.4?

a.

200

c.

250

b.

2,000

d.

2,500

____ 35. According to Figure 5.4, what term describes elasticity of supply in this market as the price increases from $1.00 to $2.00 a slice?

a.

Elastic

c.

Unitary elastic

b.

Inelastic

d.

Extremely elastic

____ 36. The market price of a slice of pizza has risen from $1.50 to $2.00. Based on Figure 5.4, the average pizzeria will respond by

a.

making 50 fewer slices a day.

c.

making 500 fewer slices a day.

b.

making 50 more slices a day.

d.

making 500 more slices a day.

____ 37. What happens when wages are set above the equilibrium level by law?

a.

Firms tend to try to break the law and hire people at the equilibrium level.

b.

Firms employ more workers than they would at the equilibrium wage.

c.

Firms employ fewer workers than they would at the equilibrium wage.

d.

Firms hire more workers but for fewer hours than they would at the equilibrium wage.

____ 38. On which kinds of goods do governments generally place price ceilings?

a.

those that are cheap but could become more expensive without the ceiling

b.

those that are not necessary but have become customary

c.

those that are essential and cheap

d.

those that are essential but too expensive for some consumers

____ 39. When buyers will purchase exactly as much as sellers are willing to sell, what is the condition that has been reached?

a.

supply and demand

c.

equilibrium

b.

excess demand

d.

price floor

____ 40. What happens when the supply of a nonperishable good is greater than the consumer wants to buy?

a.

the good is discarded

b.

the good becomes a luxury and the price rises

c.

either the good remains unsold or the price drops

d.

either the good is saved for later sale or the price is raised

____ 41. Why did Communist governments use a command economic system for many years?

a.

as a way to avoid the expense and difficulties of a free market

b.

in an attempt to create a society in which everyone was equal

c.

to limit the costs of production of many goods

d.

as a method of keeping the consumer from getting what he or she wanted

____ 42. Why did the U.S. government use rationing for some foods and consumer goods during World War II?

a.

to guarantee each civilian a minimum standard of living in wartime

b.

to keep sellers from raising prices on necessary goods

c.

because the English government had also decided on rationing

d.

to earn more money to support the military

____ 43. What happens to a market in equilibrium when there is an increase in supply?

a.

Excess supply means that producers will make less of the good.

b.

Quantity demanded will exceed quantity supplied, so the price will drop.

c.

Quantity supplied will exceed quantity demanded, so the price will drop.

d.

Undersupply means that the good will become very expensive.

____ 44. What is it called when the government uses some tool other than money to allocate goods?

a.

supply management

c.

disequilibrium

b.

rationing

d.

resource allocation

____ 45. In response to rising car traffic, demand for bicycles has increased. The new equilibrium point will show

a.

more bicycles sold, but at a higher price.

b.

fewer bicycles sold, but at a higher price.

c.

more bicycles sold, but at a lower price.

d.

fewer bicycles sold, but at a higher price.

____ 46. Which of these is most likely to lead directly to a black market?

a.

a supply shock

c.

rationing

b.

a price floor

d.

equilibrium

____ 47. Rent control is a type of

a.

price ceiling.

c.

rationing.

b.

price floor.

d.

surplus.

____ 48. In a free market, prices lead to an efficient allocation of resources. In other words,

a.

consumers can buy unlimited amounts of any good they like at a price of their choice.

b.

resources are used in the most valuable and productive way according to the needs of consumers and producers.

c.

the government decides who controls natural resources.

d.

people who own resources are unable to bargain with people who wish to buy resources.

____ 49. Why do fads often lead to shortages, at least in the short term?

a.

Buyers and sellers are unable to agree on a price for the good.

b.

Laws prevent stores from responding to excess demand in time to prevent a shortage.

c.

Manufacturers charge extremely high prices for the goods that stores are unwilling to pay.

d.

Demand increases so quickly and unexpectedly that time is needed for the quantity supplied and price to increase to reach a new equilibrium point.

____ 50. Technological process has reduced the cost of manufacturing MP3 players. If demand is unchanged,

a.

more MP3 players will be sold at a higher price.

b.

fewer MP3 players will be sold at a higher price.

c.

more MP3 players will be sold at a lower price.

d.

fewer MP3 players will be sold at a higher price.

____ 51. According to Figure 6.2, in this market, a price of $1.00 would be

a.

the equilibrium price.

c.

a price ceiling.

b.

a price floor.

d.

a subsidy.

____ 52. According to Figure 6.2, at the equilibrium price, how many slices of pizza will be sold?

a.

150

c.

250

b.

200

d.

300

____ 53. If the government set a price of $2.00 a slice, how many slices of pizza will be sold each day, according to Figure 6.2?

a.

none

c.

200

b.

150

d.

250

____ 54. The price of a slice of pizza is $2.50. At the end of the day, how many unsold slices of pizza will be left, according to Figure 6.2?

a.

none

c.

100

b.

50

d.

200

____ 55. A new office building has opened and the demand for pizza has increased. The new demand curve states that consumers will buy 200 slices at $2.50 each and 300 slices at $1.50 each. Based on Figure 6.2, if the slope of the curve has not changed, what is the new equilibrium price and quantity supplied?

a.

$1.00, 300 slices

c.

$2.00, 250 slices

b.

$1.50, 200 slices

d.

$2.00, 150 slices

____ 56. When is a buyer NOT willing to spend a lot of time and energy researching the market?

a.

when buying a large quantity of goods

b.

when there are many identical products available

c.

when the savings to be made are small

d.

when prices vary but quality is the same

____ 57. What kind of market runs most efficiently when one large firm supplies all of the output?

a.

a natural monopoly

c.

perfect competition

b.

a network

d.

imperfect competition

____ 58. How does a company arrange to sell its products to people who are unwilling to pay the top price for them?

a.

by allowing rebates to some preferred customers who buy a lot of goods

b.

by charging each customer the maximum amount they are willing to pay

c.

by charging different prices according to the group to which the buyer belongs

d.

by changing the product and selling a lesser one to people who are unwilling to pay for the top product

____ 59. What is monopolistic competition?

a.

one company selling the identical product under different names

b.

one company selling several different products under different names

c.

a very few companies selling identical products

d.

many companies selling similar but not identical products

____ 60. What happens to a monopolistically competitive firm that begins to charge an excessive price for its product?

a.

The firm will go out of business.

b.

Consumers will substitute a rival’s product.

c.

Consumers will boycott the product.

d.

The government will regulate the price.

____ 61. Why does the government sometimes give monopoly power to a company by issuing a patent?

a.

The government does not want competition for the product.

b.

The company makes a product better than anyone else’s.

c.

The company pays the government for the patent.

d.

The company can then profit from their research without competition.

____ 62. Which of the following is NOT a condition for perfect competition?

a.

Many buyers and sellers participate in the market.

b.

Sellers offer a wide variety of products.

c.

Buyers and sellers are well informed about products.

d.

Sellers are able to enter and exit the market freely.

____ 63. Which of the following industries have been deregulated in recent years?

a.

low-cost housing

c.

airlines

b.

pharmaceuticals

d.

steel

____ 64. Which of the following is a product that is considered a commodity?

a.

automobiles

c.

writing paper

b.

feed corn for cattle

d.

apples

____ 65. What is the definition of an oligopoly?

a.

one firm producing 95 percent of the output

b.

two to four firms producing 70 percent to 80 percent of the output

c.

eight to ten firms producing 60 percent to 70 percent of the output

d.

eight to ten firms producing 90 percent of the output

____ 66. What is one of the effects that the Internet has had on business?

a.

It has led to new monopolies in many industries.

b.

It has decreased the kinds of goods that are available to individual buyers.

c.

It has increased the prices of goods that are not bought on the Internet.

d.

It has reduced start-up costs for many businesses.

____ 67. What was the chief effect of the Sherman Antitrust Act?

a.

The federal government repealed regulations that controlled the airline and trucking industries.

b.

Microsoft required personal computer manufacturers to include its web browser with the Microsoft Windows operating system.

c.

John D. Rockefeller formed the Standard Oil Trust as a protected natural monopoly.

d.

The federal government won the power to prevent monopolies and mergers that interfered with trade between states.

____ 68. A monopolist will set its production at a level where marginal cost is equal to

a.

marginal revenue.

c.

total revenue.

b.

the equilibrium market price.

d.

quantity supplied.

____ 69. Which of the following markets is an example of monopolistic competition?

a.

water

c.

bookbags

b.

oranges

d.

bus tickets

____ 70. Which of the following is NOT an example of barriers to entry?

a.

Cable companies must lay miles of undergound cable before they can serve a single customer in a new market.

b.

In some counties, laws require retail stores to be closed on Sundays.

c.

An entrepreneur wishing to own a clothing store must rent a building, hire workers, and buy clothing for sale.

d.

A person who wishes to practice medicine is required to attend medical school, complete an internship, and pass a state exam.

____ 71. Why do companies practice price discrimination?

a.

Price discrimination enables companies to charge all consumers the same price for a good or service.